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02/08/2022

Liquid Gold: Beverage alcohol at convenience

Amid a Canada-wide industry push, beverage alcohol may finally be ready for its long-awaited breakthrough. Are you?
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BEER AND WINE

For years now, the convenience industry has argued that beer and wine is the biggest untapped opportunity for the majority of Canadian corner stores. And the pandemic has starkly illustrated that it is also the best bet for the industry to future-proof its economic health, amid changing consumer expectations and shifting core categories, such as tobacco, vaping (heavily regulated), lottery (increasingly digitized), and fuel.

Quebec is one of only two provinces where beer and wine is sold in c-stores. Taking into account only beer, sales are so good in Quebec that it ranks as the second-largest convenience category for all of Canada. And it is continuing to grow (see infographic).

To survive and thrive

According to data from the Convenience Industry Council of Canada (CICC), between 2016 and 2019 stores in Ontario closed at twice the rate in Quebec—618 compared to 301. “There is also evidence that the declines have been much sharper in Ontario in rural populations,” says Anne Kothawala, CICC president and CEO. “This underscores that expansion of beverage alcohol could literally be one of the determining factors as to whether rural stores can survive.”

The industry association has been running a campaign, Choose Convenience. Choose Ontario, urging the Ontario government to allow c-stores to sell Ontario-made wine and beer, which would help prop up the more than 350 wineries and 300 micro-breweries (although the big guys have factories here, as well).

READ: CICC calls on Ontario to allow convenience stores to sell local craft beer, wine, coolers

Promises, promises

It’s the latest in a long line of industry initiatives, including the Convenience and Choice coalition (made up of CICC, Ontario Convenience Stores Association, Ontario Korean Businessmen's Association and Free My Booze) advocating for the sale of beer and wine at convenience. In 2018, Premier Doug Ford promised to make beer available in corner stores (it looked promising, however plans fell apart due, in part, to disagreements over the master framework agreement, which is to expire in 2025) and the CICC is reminding him of that promise ahead of the provincial election in June.

“What we are really looking towards is getting something included in Conservative government’s spring budget, as it will be their de facto platform leading into the election,” says Kothawala.

MPP Stan Cho, who has strong ties to the industry and championed to designate the week before Labour Day as Convenience Store Week in Ontario, touched on the issue of beer and wine when speaking at a recent industry event: “I know there is more to be done… I will work tirelessly to make sure we get that done in this province sooner than later.”

Encouraging signs

The Ontario Convenience Stores Association (OCSA), meanwhile, is encouraging its members to get ready. It has partnered with a fintech company, Liquid Avatar Technologies, and the Ontario government to develop a digital age verification program for beer and wine purchases.

“It could work like the lottery with a digital reader in every store or via a QR code,” says OCSA CEO Dave Bryans, who is an outspoken advocate in the quest to get beer and wine in corner stores.

READ: Thirsty for change

CJ Hélie, president at Beer Canada, which represents over 50 brewing companies across the country, says there are encouraging signs that Ontario might move on the promise. “The province has enjoyed some very significant alcohol liberalization initiatives over the past 20 months or so, many driven as a function of COVID,” says Hélie, noting restaurants, for instance, can now deliver alcohol with take-out or delivery orders in many provinces. Saskatchewan also now allows this.

Should it open up, the category isn’t without substantial challenges, however. For instance, in Ontario, “our analysis shows that 45% of the price of beer at retail are taxes, so there is very little operating margin there to play with,” cautions Hélie.

Still, liquor would get more customers into convenience stores and more frequently: Quebec stores have developed strategies that stores in other provinces could adopt to make the most of the category. (See “Secrets to success: The Quebec experience” below)

The bottom line

The category and its potential are top of mind for independent, as well as regional and multinational chains.

“Beverage alcohol is an important traffic builder for our Quebec market and is no doubt a promising opportunity for other Canadian markets to explore,” Stéphane Trudel, SVP operations Canada, Alimentation Couche-Tard, told Convenience Store News Canada. “Our success is driven by the quality of our offering and promotions, but also our by our commitment to constantly tailoring the customer offering and experience and most importantly by being a responsible retailer in the communities we serve.’’

Trudel was one of three panelists (including 7-Eleven VP & GM, Norm Hower, and Parkland Corporation SVP, strategic marketing and innovation, Ian White) who spoke passionately about the issue at the CICC Summit last fall. All agreed consumers' expectations are evolving in this on-demand world and the category is essential if c-stores are to offer real convenience to customers. The leaders emphasized this is also the channel’s best opportunity to grow. All are working aggressively to make it happen.

7-Eleven Canada filed an application with the Alcohol & Gaming Commission of Ontario for on-site liquor sales at 61 locations last year, though at press time had withdrawn some applications. 7-Eleven did, however, introduce beverage alcohol at an Edmonton store in December, capitalizing on new and relaxed consumption rules from the Alberta Gaming, Liquor & Cannabis Commission. More stores are likely to follow. 

READ: 7-Eleven opens the taps on serving beverage alcohol

MacEwen, which acquired Quickie Convenience Stores last fall, also hopes to carry beer and wine.

“It would significantly improve traffic in our Ontario stores, support an overall increase in sales and help profitability, as these customers don’t buy only alcohol but also snacks,” says Hélène Drolet, MacEwen’s SVP and GM of retail.

What makes Drolet so sure? She can look at Quickie’s 12 stores in Gatineau, Que., and see the difference between their performance and the Quicki stores in Eastern Ontario. “It’s a very important category,” she stresses.


 

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Background Blurred Defocused Beers are cooling in fridge, freezer or refrigerator shelf. Defocused Blurry Night life, Night Club, Bar, Pub, Store or Grocery

First-mover advantage: C-stores need to be ready to adapt quickly

 Once a province approves the sale of beer and wine in corner stores, it will be a race for their operators and owners to get ready for customers.

The race won’t be a sprint, however; government is expected to include a long lead time before any coming-into-effect date. That doesn’t mean, though, c-stores shouldn’t move quickly, especially when it comes to ensuring they have refrigeration capacity.

Due to supply chain issues, Jason Giuliani, VP of sales at Norbec, says its ETA on cooler orders right now is four months or longer. “Before the pandemic, you could get them in five or six weeks,” he notes. “Now you’re looking at 20 weeks.”

Some c-store owners report getting quotes from manufacturers with a delivery date seven- to eight-months out. An announcement from any province opening the opportunity for the convenience sector could create a further backlog, so c-stores don’t want to delay on cooling needs once an announcement is made.

Some independent operators are looking to get ahead of this potential pitfall, knowing the national chains have more budget, infrastructure and manpower to ramp up quickly.

Little Short Stop Stores in Ontario has proactively “retrofitted freezers into coolers,” says Robbie Mulder, district manager at the family-owned chain, which has 30 locations across Kitchener, Waterloo, Cambridge and Guelph.

“We brought in smaller freezer capsules, and then took the large-capacity footprint that opened up and turned it into a cooler,” explains Mulder, noting Waterloo Brewing would be a natural partner as a local craft beer player. “We then expanded our beverage line so that it can be shrunk in the event beer and wine comes in.”

“We have been working on this over the last year or so,” says Mulder. “If it happens, we will be ready.”


 

Secrets to success: The Quebec experience

The sale of beverage alcohol is an important traffic builder and driver for the Quebec convenience market. While big sellers by volume, the profit margin on beer and wine is modest. We asked three c-store owners and operators to share how they maximize the popularity of the category.

 

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Wine on shelves at Ste. Odile

Independent operator: Provisions Ste-Odile, Quebec City

Sales: While not providing a dollar amount, Praful Manek, who opened Provisions Ste-Odile in 1983, says beer has become the biggest-selling category for his store. In 2021, the store moved between 40,000 to 50,000 cases.

Store footprint:  About 500 to 600 cases of beer are ready for purchase at any one time in a cold room that measures 54 ft. by 17 ft., features 13 self-serve doors, each 30 inches wide, and a double door so that customers can walk into it. Wine, meanwhile, is displayed on 20 linear feet of shelving. Manek says an abundant supply of wine is always on display. “If a customer sees 60 bottles of a particular wine, they’ll think ‘That must be a big seller.’ It’s also more visually appealing than just seeing a few bottles of a brand, as they’ll look old or as if nobody wants them.” His store is 4,000 sq. ft. in total.

Strategy: Manek ensures a good portion of the beer he sells is from the big guys, as they support large orders with a discount and in-store promotional materials, which they’ll set up, But Manek says it’s important to carry product from micro and craft breweries, both in support of local and to meet customer demand. “I make more profit when I sell a single can from a microbrewery than I do a case of 24,” he notes.

Tip for success: Keep your beer prices low, and you’ll become a weekly destination for customers, says Manek. On Google Reviews, locals rave that Provisions Ste-Odile has the best prices on beer in all of Quebec City. “Alcohol brings people in, but with their case of beer or bottle of wine they might also pick up a can of beans or bread.”

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Exterior of Quickie Convenience Store

Regional operator: Quickie Convenience Stores, Gatineau  

Sales: At Quickie’s 12 stores in Gatineau, beer and wine accounts for up to 20% of annual revenue for each location, says Hélène Drolet, SVP and GM of retail at MacEwan, which also has 39 stores in Eastern Ontario.

Strategy: “This is not the most profitable category in the store,” says Drolet, “but it brings in traffic and helps to sell other categories with better margins, like chips and snacks.” MacEwan also keeps up on trends in the category, particularly ensuring they have craft beers for customers to discover. “We saw a lot of IPA beers in the market last year, and the customer was all into it,” she says. “Now, the market is trending towards ale, and we expect higher customer demand for these type of beers.”

Tip for success: “You need to keep this category evolving to be successful,” says Drolet. “The customer is also looking for great value, so if you’re able to promote a variety pack, they will appreciate it.”

 

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Inside of Circle K in Quebec with beer and wine displays

National operator: Alimentation Couche-Tard, Laval

Sales: Couche-Tard is recognized for its wide assortment, compelling offers, effective stocking and merchandising, as well as its commitment to being a responsible retailer. The market has evolved significantly in recent years, with customers seeking new products and more variety. In the past, 20% of products could represent 80% of sales, but that is shifting, as craft beer and alternative products gain in popularity.

Strategy: Competition is heavy, so a lot of promotional space is dedicated to enticing and retaining customers. Pricing, assortment and merchandizing are key. Trend wise, the convenience giant notes a transition in consumer preference from bottles to cans, as well as higher demand for craft beer, seltzers and ready-to-drink (RTD) malt-based product (which used to be available only through the SAQ). A company spokesperson notes these “have been key developments in our offer in the past years, as customer demand increases steadily…  This shift in our offering also allowed us to make very bold and visual changes in some of our store floor plans—integrating large, specialized fridges which promote local craft beer and display them in a very attractive way.”

Tips for success: Planning is crucial and integrating detailed planograms will help both retailers and suppliers. “At Couche-Tard, our strength is working together with our partners, and they have been very supportive in ensuring we have the best customer experience possible and have the right tools in place,” said the spokesperson. “Next, it’s all about understanding your customers and promoting an offer that will delight and engage them and leveraging that on all channels available. We’ve been able to accomplish that by constantly evaluating our impact and tailoring our offer, promotions, cross-promotions, and ensuring beverage alcohol is very visible in the cooler and floor space, especially at key times in the year around peak traffic periods.” As with all age-restricted products, it’s important to maintain high standards and commit to being a responsible retailer, by ensuring the product is in the right hands, no exceptions.

The Beverage Alcohol Report originally appeared in the January/February 2022 print/digital issue of Convenience Store News Canada

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